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Is Vanguard PRIMECAP Fund Administrative (VPMAX) a Strong Mutual Fund Pick Right Now?

RLI Corp. (RLI) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Having trouble finding a Large Cap Growth fund? Vanguard PRIMECAP Fund Administrative (VPMAX) is a possible starting point. VPMAX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify VPMAX in the Large Cap Growth category, an area rife with potential choices. Large Cap Growth funds invest in many large U.S. companies that are expected to grow much faster compared to other large-cap stocks. To be considered large-cap, companies must have a market cap over $10 billion.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VPMAX. Vanguard PRIMECAP Fund Administrative made its debut in November of 2001, and since then, VPMAX has accumulated about $62.13 billion in assets, per the most up-to-date date available. The fund is currently managed by a team of investment professionals.

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Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 16.36%, and it sits in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 17.09%, which places it in the middle third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of VPMAX over the past three years is 11.82% compared to the category average of 10.29%. The standard deviation of the fund over the past 5 years is 11.06% compared to the category average of 9.91%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In VPMAX's case, the fund lost 44.26% in the most recent bear market and underperformed comparable funds by 4.71%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Nevertheless, investors should also note that the fund has a 5-year beta of 1.05, which means it is hypothetically more volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. Over the past 5 years, the fund has a positive alpha of 1.09. This means that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Holdings

Exploring the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is mostly on equities that are traded in the United States.

As of the last filing date, the mutual fund has 87.99% of its assets in stocks, which have an average market capitalization of $165.39 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology

  2. Industrial Cyclical

  3. Health

Turnover is about 16%, so those in charge of the fund make fewer trades than comparable funds.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, VPMAX is a no load fund. It has an expense ratio of 0.31% compared to the category average of 1.10%. Looking at the fund from a cost perspective, VPMAX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $50,000 and that each subsequent investment needs to be at $1.

Bottom Line

Overall, Vanguard PRIMECAP Fund Administrative ( VPMAX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a somewhat average choice for investors right now.

Want even more information about VPMAX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.


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